P.M. meets banks to stave off consumer defaults
The Government has met officials from the Central Bank and banks and financial institutions' representatives to discuss ways to lower consumer loan defaults and reduce potential encounters between police and bad debtors.
The Prime Minister, Tuilaepa Dr. Sailele Malielegaoi, confirmed the meeting during his weekly program on TV3 with host To’alepai Rula Su’a Vaai.
“We met early in the week with the Central Bank, bank companies [and] small loan companies that entice [people to take out] loans with high interest,” the Prime Minister said.
“Also at the meeting were the Ministry of Police and the Ministry of Justice and Courts Administration, they deal directly with these debtors that are unable to repay their loans.
“And this goes back to living within your means.”
The Prime Minister gave viewers an example of how people can fall into financial default or even turn to crime.
"An employee's net salary is $2,000 but on payday and after deductions from several loan companies, there’s only $50 left and yet this person has six children to feed,” he said.
“This eventually leads to theft and it is because our people cannot differentiate which obligation to fulfil and which one to pass.
“And this is because of public perception. Even though, the family matter requires $500 but you want to donate $2,000 and then you turn to your children and make these demands and if your daughter is a cashier, they will eventually steal.
“There are numerous family affairs that ignite this mentality that because you’re a chief in your village you’re obligated to fork up more [money] and in the end, your children here and overseas suffer.”
Under the current laws, bad debtors can face prison terms not exceeding six months, and prisoners should be released if their debt is paid sooner than their sentence.
Police have complained about chasing up bad debts being a drain on their resources.
The Prime Minister said the Government had made efforts to ease the cost-of-living burden by decreasing the number of corned beef in a case to make it cheaper to assist the public in family and villages affairs.
Last year there was a call in Parliament by M.P. Ali'imalemanu Alofa Tuuau, who appealed to the Government to introduce laws to monitor financial service institutions that target low-income families with high-interest rates.
The M.P. expressed concerns that the financial services are offering loans with high-interest rates and gave an example.
“If I loan for $1,000 I get only $800 and yet I pay back $1,500 and this does not include the $200 previously deducted,” the M.P. said.
“There should be laws in place to govern these types of loans, especially the interest rate are quite high”.
In response, Minister of Finance, Sili Epa Tuioti promised that the Government is looking at amending the law, in order to put a cap on interest rates for loans from financial services companies targeting low-income citizens.
“The problem is under the law, the Central Bank of Samoa does not play a regulatory role when it comes to financial institutions," the Minister said.
"But I have already consulted with the Governor of the Central Bank, and by the next Parliamentary session we will have the law ready for your respective consideration."
During his program on TV3 this week, the Prime Minister made reference to options that the Government continues to employ to reduce the cost of living.
He said the Government is also leading the programmes to revive the original way of weaving fine mats, to revive a tradition that alleviates poverty.
This is something those that grew up in their family business will never know.
“This is what we understand because we know what it's like to grow up poor, hence making decisions to reflect and address these issues, our people that are poor,” said the Prime Minister.
In January wholesalers and shops started selling downsized cartons of tinned fish and corned beef as part of wider efforts by the Government to reduce the cost of living.